Latest / Bloomberg Intelligence / Softbank Sells Nvidia Stake for $5.8 Billion to Fund AI Bets

Transcript

Softbank Sells Nvidia Stake for $5.8 Billion to Fund AI Bets · Bloomberg Intelligence

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  Speaker 1: Bloomberg Audio Studios, podcasts, radio news. You're listening to the
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  Speaker 2: A lot of news flow today on the tech front Nvidia.
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  Speaker 2: I mean, when Masa Son sells stock in a company,
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  Speaker 2: that's news to me.
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  Speaker 3: That is news. But I mean does he have great
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  Speaker 3: timing or does he have poor timing? That's my question?
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  Speaker 4: Uh, yep, I don't know. I mean you mean sold
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  Speaker 4: it for five twenty billions. What are you gonna do
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  Speaker 4: with that?
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  Speaker 2: Ed Luvelow, he does all this tech stuff out there
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  Speaker 2: in San Francisco.
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  Speaker 4: He is the b Tech co anchor alongside Caroline Hyde.
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  Speaker 2: So Ed, you know, whenever Massa herosn does anything, it
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  Speaker 2: really gets people's attention.
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  Speaker 4: Here, what do you make of this trade? Your heads
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  Speaker 4: are in the right place.
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  Speaker 5: I mean, they're selling out of the entire stake, and
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  Speaker 5: that's worth reiterating. It's all of it in one go
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  Speaker 5: five point six billion dollars, which for a five trillion
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  Speaker 5: dollar company, almost five trillion dollar company is not that much,
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  Speaker 5: but it's also not unprecedented. And what Scarlett was saying
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  Speaker 5: about timing, soft Banks sold out of Nvidia once before.
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  Speaker 5: That was in twenty nineteen, right before the kind of
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  Speaker 5: chat GBT explosion in AI data center demand. But then
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  Speaker 5: they kind of realized twenty twenty they needed to get
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  Speaker 5: back in and they slowly built up a stake which
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  Speaker 5: resulted in on paper gains that were really significant. So
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  Speaker 5: the market seeing this, even though in video is down,
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  Speaker 5: I think it's down two and a half per cent, right, guys,
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  Speaker 5: not necessarily is an issue with Nvidia or a signal
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  Speaker 5: that SoftBank has concerned about Nvidia. They're seeing it or
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  Speaker 5: taking soft Bank at its word that this is just
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  Speaker 5: financing for the other things they want to do.
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  Speaker 3: Okay, And in terms of the other things that wants
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  Speaker 3: to do, It's got a lot of different AI projects
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  Speaker 3: going on, isn't it.
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  Speaker 5: Across both public and private initiatives. Right, There are some
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  Speaker 5: AI startups in the compute space that they're looking at
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  Speaker 5: taking private. For example. They still want to deploy capital
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  Speaker 5: out of the Vision funds and Vision fund too. And
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  Speaker 5: you know they didn't tell tell us much. The CFO
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  Speaker 5: in particular on the call. But but that's it, you know,
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  Speaker 5: realizing gains, using the realized gains to generate cash, and
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  Speaker 5: using that cash for investing.
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  Speaker 4: That's what they do, right, I think, yep, exactly right.
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  Speaker 2: Do you think that Massa believes that he and the
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  Speaker 2: fund have a proper allocation to AI at the moment?
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  Speaker 5: This is the really important question because there is a
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  Speaker 5: lot of exposure with soft Bank to open AI, both
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  Speaker 5: in terms of direct investment but also co financing and
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  Speaker 5: partnering on the Stargate Data Center project. Some people have
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  Speaker 5: concern about the concentration risk. You know, right now AI
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  Speaker 5: as seen as the world's leading frontier.
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  Speaker 4: Model lab or AI lab.
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  Speaker 5: But that's not guaranteed of course, and so they would
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  Speaker 5: ask what is it diversified enough? But yeah, it's a
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  Speaker 5: really critical question. Remember, like through ARM and the board
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  Speaker 5: representation that they have with ARM, there is an idea
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  Speaker 5: that if ARMED design staf senships, Top Bank benefits from that.
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  Speaker 5: What they're doing with ampare in the compute space as well.
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  Speaker 5: That's why they need this five point six billion dollars.
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  Speaker 3: They say, Okay, so that's one of the big stories
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  Speaker 3: on the top Worldwide page on the Bloomberg terminal. The
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  Speaker 3: other one is Corewed's results, and we talked a little
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  Speaker 3: bit about Nvidia earlier. In Vidia actually owns about a
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  Speaker 3: six and a half percent stake in Coreweaves, one of
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  Speaker 3: those neo cloud companies. What was the takeaway from the
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  Speaker 3: latest earnings report.
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  Speaker 5: Yeah, so they cut their full year revenue guidance for
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  Speaker 5: fiscal twenty five to a range of five point zero
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  Speaker 5: five billion to five point one five billion dollars. The
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  Speaker 5: previous high end of the range had been five point
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  Speaker 5: three five billion dollars, so they've lowered it by about
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  Speaker 5: two hundred million dollars. And they say that that is
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  Speaker 5: because a third party that was building data center capacity
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  Speaker 5: for them let them down. They're behind schedule, and because
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  Speaker 5: that data center won't be up and running, they can't
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  Speaker 5: realize the revenue for a specific customer, which they're not naming.
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  Speaker 5: Does that justify the stock being down eleven percent? That's
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  Speaker 5: not a question for us. That's a question for the
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  Speaker 5: sale s item, for the investors themselves. But there's a
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  Speaker 5: lot of commotion about what it is a two hundred
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  Speaker 5: million dollar trim because some capacity is delayed and the
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  Speaker 5: thing you need to know Scarlet is like generally speaking,
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  Speaker 5: call we've cannot get data center capacity up and running
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  Speaker 5: quick enough to meet the demand that it has.
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  Speaker 4: Stay with us. More from Bloomberg Intelligence coming up after this.
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  Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
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  Speaker 1: wherever you get your podcasts, or watch us live on YouTube.
• 5:07
  Speaker 4: I think my new favorite stock symbol is peace guy.
• 5:11
  Speaker 6: Yeah, such a good one.
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  Speaker 2: I like that one for Paramount Skydance. The company reported
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  Speaker 2: earnings yesterday kind of in line numbers, but there's a
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  Speaker 2: lot of cost cutting going over there, and the stocks
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  Speaker 2: up ten percent on the news today. So let's check
• 5:23
  Speaker 2: it out with Getha rang on Nothing because she covers
• 5:25
  Speaker 2: all the media stuff for Bloomberg Intelligence and Getha I'll
• 5:28
  Speaker 2: ask you the one you know, Ernie's question. Then I
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  Speaker 2: want to get to the need of the matter here.
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  Speaker 2: How were the earnings for this newly combined company and
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  Speaker 2: what's the outlook?
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  Speaker 7: Yeah, Paul, earnings were a little bit messy. They were mixed,
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  Speaker 7: but the good news was that the company kind of
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  Speaker 7: over delivered when it came to streaming crafitability, which is
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  Speaker 7: the big thing that everybody's looking for, given that, you know,
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  Speaker 7: they've just lost tons and tons of money on their
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  Speaker 7: streaming business, so that was good news. I think why
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  Speaker 7: Wall Street is really cheering, you know, paramount Skuidance today
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  Speaker 7: is because the guidance that they provided for twenty twenty
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  Speaker 7: six was pretty promising. So A Street was in at
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  Speaker 7: about three point one billion for ibit dah for next year,
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  Speaker 7: they came in with three point five billion, and a
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  Speaker 7: lot of that, as you just pointed out, was because
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  Speaker 7: of the cost savings. So they've taken it out from
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  Speaker 7: two billion to three billion. Very very aggressive measures across
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  Speaker 7: the board, but I think overall it was you know,
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  Speaker 7: what really kind of came across was that this is
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  Speaker 7: a solid management team that really knows what they're doing.
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  Speaker 7: They're super focused, you know, on driving that transformation within
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  Speaker 7: the company, and I think that really kind of cheered investors.
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  Speaker 3: Speaking of driving transformation in the company, the big question
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  Speaker 3: for Paramounts guidance is whether it's going to buy Warner
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  Speaker 3: Brothers Discovery wholesale or at least parts of it. Did
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  Speaker 3: we hear anything from the executives in the earnings call.
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  Speaker 7: Yeah, Scarlet, that's a great question. I mean, obviously that
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  Speaker 7: was the first thing on everybody's minds. So, you know,
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  Speaker 7: obviously no specific commentary on Warner Brothers itself, but the
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  Speaker 7: one thing that they did say was that they think,
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  Speaker 7: you know, they don't there's no must have for them,
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  Speaker 7: So they really kind of downplayed the whole need for
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  Speaker 7: M and A. They said that, you know, they have
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  Speaker 7: all of the you know, they have a great portfolio
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  Speaker 7: of assets. Of course, we all know that these assets
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  Speaker 7: have been undermanaged for many many years, underinvested, so there's
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  Speaker 7: a lot of work to do there. There's a lot
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  Speaker 7: of restructuring that needs to happen. But they really kind
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  Speaker 7: of downplayed you know, Warner Brothers. Of course, we know that,
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  Speaker 7: you know, yes, they are making huge content investments. They
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  Speaker 7: are making huge technological investments. But if you look at
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  Speaker 7: their streaming service, which is Paramount Plus, it has roughly
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  Speaker 7: eighty million subscribers. Okay, they do have, you know, all
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  Speaker 7: of these new content investments. Let's say the UFC ZUOFA boxing,
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  Speaker 7: all of that South Park not enough to move the needle.
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  Speaker 7: And I think they know that the street knows that,
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  Speaker 7: which is why they do need something transformative like Warner
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  Speaker 7: Brothers Discovery, which will really kind of put them on
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  Speaker 7: the map when it comes to streaming for sure, and
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  Speaker 7: also in terms of extracting more synergy on the linear
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  Speaker 7: TV side of the business where they have huge exposure.
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  Speaker 7: Over fifty five percent of revenue still comes from linear TV.
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  Speaker 2: So when you look at the enterprise value of Warner
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  Speaker 2: Brothers Discovery, it's almost three times the enterprise value of
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  Speaker 2: Paramount Skuidance, suggesting that if Paramounts Guidance wants to do
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  Speaker 2: a deal here, they're going to need a ton of equity,
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  Speaker 2: whether it comes from mister Ellison or whether it comes
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  Speaker 2: from private equity or some combination. Is that kind of
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  Speaker 2: where people are thinking about it.
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  Speaker 7: That is kind of where people are thinking about it.
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  Speaker 7: And you know what was really interesting, Paul was, you know,
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  Speaker 7: they've made three bids for Warner Brothers Discovery thus far,
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  Speaker 7: all of which have been rejected. The last one was
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  Speaker 7: for almost twenty four dollars a share, which was basically
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  Speaker 7: sixty billion equity value, about ninety billion enterprise value. And
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  Speaker 7: the thing there was they were offering eighty percent cash.
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  Speaker 7: I mean they first started out with sixty percent. They
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  Speaker 7: sweetened it to eighty percent, but David Zaslav, as we know,
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  Speaker 7: is really a tough negotiator and basically said no, So
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  Speaker 7: we think he's looking for something north of thirty. I'm
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  Speaker 7: not sure Paramount Skuidance is going to be willing to
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  Speaker 7: cough up that much, but let's see.
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  Speaker 6: Yeah, that's a that's a big, big question, Mark Keitha.
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  Speaker 3: As you look at the media landscape, we're focused so
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  Speaker 3: much on Warner Brothers Discovery and what happens to its assets,
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  Speaker 3: what's happening to its businesses. What are we missing when
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  Speaker 3: we look at what else might be a for sale
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  Speaker 3: or might become, you know, not a for sale, but
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  Speaker 3: something that a buyer might be interested in pursuing.
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  Speaker 7: Yeah, I mean, when we look across the landscape, you're
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  Speaker 7: absolutely right, Scarleton. The reason why there's so much of
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  Speaker 7: attention on Warner Brothers Discoveries because it's really kind of
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  Speaker 7: the last big you know, iconic studio if you're looking
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  Speaker 7: at it, a huge streaming property with HBO, you know,
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  Speaker 7: huge names in the business, just iconic franchises, big brands,
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  Speaker 7: big brands, core franchises, things that can really move the
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  Speaker 7: needle for any company, for any buyer. We don't really
• 9:53
  Speaker 7: have anything quite like Warner Brothers. Yes, we have a
• 9:57
  Speaker 7: lot of smaller names. You can think of an AMC Networks,
• 9:59
  Speaker 7: you can think of a Life studio, you can think
• 10:01
  Speaker 7: of comcasts new spinoff cable TV networks which is called worsened,
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  Speaker 7: but none of them as attractive, you know, as as
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  Speaker 7: Warner Brothers. So there there are a lot of opportunities
• 10:12
  Speaker 7: for consolidation. You have a lot on the broadcast TV
• 10:15
  Speaker 7: station side, whether you're thinking of a Gray or Sinclair,
• 10:18
  Speaker 7: but again, nothing quite as attractive or as massive as
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  Speaker 7: Warner Brothers Discovery.
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  Speaker 4: Timing. When do you think something might happen with Warner
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  Speaker 4: Brothers Discovery.
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  Speaker 7: It has to happen quickly, Paul, because they you know,
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  Speaker 7: if Warner Brothers Discovery doesn't decide to go ahead with
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  Speaker 7: a sale, they do have a split of the company,
• 10:39
  Speaker 7: which is, you know, splitting the company into the TV
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  Speaker 7: network's division and the streaming of studio's division. That is
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  Speaker 7: supposed to happen sometime mid twenty twenty six. So I'm
• 10:48
  Speaker 7: assuming you know, things have to move pretty quickly in
• 10:50
  Speaker 7: the next couple of months.
• 10:52
  Speaker 4: Stay with us. More from Bloomberg Intelligence coming up after this.
• 10:59
  Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
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  Speaker 1: weekdays at ten am Eastern on Apple, Coarclay, and Android
• 11:06
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• 11:09
  Speaker 1: you get your podcasts, or watch us live on YouTube.
• 11:13
  Speaker 3: One subject that I can't get enough of is premium
• 11:16
  Speaker 3: credit cards and the rewards that you rack up if
• 11:20
  Speaker 3: you use them only in certain times at grocery stores
• 11:23
  Speaker 3: versus restaurants versus to pay for your plane ticket. Well,
• 11:26
  Speaker 3: there's been a settlement between Visa MasterCard and merchants that
• 11:30
  Speaker 3: may change the way that we use our premium credit cards.
• 11:33
  Speaker 3: And Justin Teresi is here with us. He is a
• 11:36
  Speaker 3: bi litigation analyst to hear at Bloomberg Intelligence. Justin what
• 11:40
  Speaker 3: happened and what does this mean for my Chase Sapphire
• 11:43
  Speaker 3: card or my AMX Platform card.
• 11:44
  Speaker 4: Yeah, really big news here.
• 11:46
  Speaker 8: So first of all, this case has been going on
• 11:47
  Speaker 8: for about twenty years now, long I started before I
• 11:50
  Speaker 8: went to law school, which was a long time ago.
• 11:52
  Speaker 8: There's salt and pepper in my hair. So we're talking
• 11:54
  Speaker 8: about a really really ancient case. But basically what a
• 11:57
  Speaker 8: lot of folks don't know is when you have those
• 12:00
  Speaker 8: really valuable premium cards, right the airline miles cards or
• 12:03
  Speaker 8: the cash back cards, there's a fee associated with those,
• 12:06
  Speaker 8: and it's the merchants who are eating that fee, typically
• 12:08
  Speaker 8: around three or four percent depending on the varying swipe
• 12:11
  Speaker 8: fee when you use it at a register. So merchants,
• 12:14
  Speaker 8: no surprise, they're upset about that, right. So Visa, you know,
• 12:17
  Speaker 8: big litigation here, the accusation being that they fix those
• 12:21
  Speaker 8: fees and that you know, the merchants are basically the
• 12:23
  Speaker 8: ones eating the costs there. So big deal announced yesterday
• 12:26
  Speaker 8: between Visa, master Card and merchants would make a little
• 12:29
  Speaker 8: bit more flexibility on the part of merchants here. They
• 12:32
  Speaker 8: could basically say, hey, we're going to take the lower
• 12:34
  Speaker 8: tier version of a Visa or a master Card, but
• 12:37
  Speaker 8: we're maybe not going to accept airline miles cards or
• 12:40
  Speaker 8: cash back cards. And then alternatively, they also might have
• 12:43
  Speaker 8: the option of passing those fees onto you, the consumer
• 12:45
  Speaker 8: at the register if they do take them. So some
• 12:47
  Speaker 8: big changes here and how things are shaping up.
• 12:50
  Speaker 2: Well, I've noticed in the last couple of three years
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  Speaker 2: they are doing that. Yeah, I mean, almost every merchant
• 12:55
  Speaker 2: I go to now, I don't know if it's just
• 12:56
  Speaker 2: a state of New Jersey thing, but they're saying, hey,
• 12:58
  Speaker 2: here's the cash price, here's the credit card price.
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  Speaker 8: Yeah, Paul, this is actually a really interesting issue here
• 13:03
  Speaker 8: because state by state there's a lot of differences in
• 13:06
  Speaker 8: how this actually plays out. In New York, and I
• 13:08
  Speaker 8: see this too when I go to my dry cleaner,
• 13:10
  Speaker 8: it's like, oh, maybe that's four percent more if I'm
• 13:12
  Speaker 8: going to use my credit card here. That's actually illegal
• 13:15
  Speaker 8: in New York right now to do that, But the
• 13:17
  Speaker 8: enforcement seems to be lacking that this is a new
• 13:19
  Speaker 8: law pass in twenty twenty four, there has to be
• 13:21
  Speaker 8: an upfront kind of price on a tag if they're
• 13:24
  Speaker 8: going to pass a surch charge onto the consumer. In
• 13:26
  Speaker 8: New York, Massachusetts, Connecticut, you can't surcharge at all. So
• 13:30
  Speaker 8: if this settlement goes through, you know, that's a big
• 13:32
  Speaker 8: question mark.
• 13:33
  Speaker 3: Too interesting that you say that the surcharge is illegal
• 13:35
  Speaker 3: in New York, because what I've seen is the dry
• 13:37
  Speaker 3: cleaner will say we'll give you a discount if you
• 13:39
  Speaker 3: pay in cash. Here's the regular price, but you get
• 13:42
  Speaker 3: the discount if you pay cash.
• 13:43
  Speaker 6: So it's no longer a surcharge.
• 13:45
  Speaker 3: Justin you said that this has been a case that's
• 13:47
  Speaker 3: been around for twenty some odd years. So yes, this
• 13:50
  Speaker 3: settlement that was announced yesterday, I mean, is it just
• 13:52
  Speaker 3: going to get caught up in a more legal jegmire?
• 13:55
  Speaker 8: You know, it really could. So last year there was
• 13:57
  Speaker 8: a first attempt to this. This is the second try now, right,
• 13:59
  Speaker 8: And the big issue that blew up the deal last
• 14:02
  Speaker 8: year is that the smaller merchants kind of pushed for
• 14:04
  Speaker 8: the terms that they set in the first place, and
• 14:06
  Speaker 8: big folks like Walmart, et cetera kind of got ice
• 14:09
  Speaker 8: out from the discussions on that. It seems like that
• 14:12
  Speaker 8: might have happened again here. The National Retail Federation was
• 14:15
  Speaker 8: out yesterday saying, wait a minute, what kind of business
• 14:18
  Speaker 8: practice would this be for us to say, hey, we're
• 14:20
  Speaker 8: going to take these cards and not those cards. And
• 14:22
  Speaker 8: they're also criticizing the fee concessions that were part of
• 14:25
  Speaker 8: this deal too for the next five years or so.
• 14:27
  Speaker 8: So I think there's still a lot of questions here.
• 14:29
  Speaker 8: There's probably enough changes from last year's deal to get
• 14:32
  Speaker 8: it over the finish line, but there's a big period
• 14:35
  Speaker 8: here with objectors who are going to be weighing in
• 14:37
  Speaker 8: on what they think of the deal. And honestly, the
• 14:40
  Speaker 8: judge last year she said, look, you guys can do
• 14:41
  Speaker 8: a lot more than you're offering to do in this deal.
• 14:44
  Speaker 8: So is this enough? That's going to be a huge
• 14:46
  Speaker 8: question moving into an approval hearing. What are the dollars
• 14:50
  Speaker 8: dollar amounts we're talking about here, you know, so it's
• 14:52
  Speaker 8: quadrupled according to the National Retail Federation since two thousand
• 14:55
  Speaker 8: and nine. But if you said MasterCard, they've got eighty
• 14:58
  Speaker 8: percent of this market for the the card fees, right,
• 15:01
  Speaker 8: one hundred and eleven billion dollars last year alone collected
• 15:05
  Speaker 8: in these wipe fees according to the NRF, So really massive, massive.
• 15:09
  Speaker 8: But you know, these companies are also diversifying their streams, right,
• 15:12
  Speaker 8: They're looking into digital wallets and other payment platforms too.
• 15:15
  Speaker 8: So there's a lot more on the table now than
• 15:17
  Speaker 8: there was when this was first brought back in two
• 15:19
  Speaker 8: thousand and five.
• 15:20
  Speaker 3: And to be clear, this is Visa and MasterCard and merchants.
• 15:23
  Speaker 3: What about American Express? Where does it sit here?
• 15:26
  Speaker 8: Yeah, so that's another great question. American Express basically settled
• 15:29
  Speaker 8: a version of this loss or one a version of
• 15:32
  Speaker 8: this lawsuit years ago. Their card acceptance terms are a
• 15:35
  Speaker 8: little bit different. Surcharging doesn't really allowed with those when
• 15:38
  Speaker 8: it's not applied to all card types, right, But that
• 15:41
  Speaker 8: begs the question if you start allowing surcharging through card
• 15:44
  Speaker 8: holder through acceptance agreements for Visa MasterCard, does Amex now
• 15:48
  Speaker 8: have to allow us for charging on its card? So
• 15:50
  Speaker 8: that's another big question mark. If this deal goes through,
• 15:52
  Speaker 8: it really has the potential to impact everything, not just
• 15:55
  Speaker 8: Visa MasterCard.
• 15:56
  Speaker 6: Paul.
• 15:56
  Speaker 3: I remember when MX used to be accepted everywhere, and
• 15:59
  Speaker 3: then after while it was like, oh we'll take Visa
• 16:01
  Speaker 3: master Card, but not American Express because it was always
• 16:04
  Speaker 3: for the merchants.
• 16:05
  Speaker 6: Too expensive, too expensive.
• 16:06
  Speaker 2: Okay, yeah, I haven't. I can't remember the last time
• 16:09
  Speaker 2: I used my AMEX card.
• 16:10
  Speaker 4: Literally can't.
• 16:10
  Speaker 6: It's there in your pocket, though it's in my pocket.
• 16:12
  Speaker 7: Okay.
• 16:12
  Speaker 6: See that's the thing.
• 16:13
  Speaker 3: I mean, what does this mean for companies that have
• 16:16
  Speaker 3: corporate cards justin.
• 16:18
  Speaker 8: So that's one of the different brackets here too. So
• 16:20
  Speaker 8: the way the settlement works is that it's going to
• 16:22
  Speaker 8: divide cards into three different types, so it be commercial cards,
• 16:25
  Speaker 8: standard customer cards, and then premium customer cards.
• 16:28
  Speaker 4: I think the.
• 16:29
  Speaker 8: Commercial and standard cards you know, you want that corporate business.
• 16:32
  Speaker 8: I think those two really are of the less concern.
• 16:35
  Speaker 8: It's those premium cards, I think, with the rewards that
• 16:38
  Speaker 8: really are on the line here in terms of whether
• 16:40
  Speaker 8: or not they continue to have that universal acceptance everywhere.
• 16:44
  Speaker 3: So there's so many businesses built around how to gamify
• 16:47
  Speaker 3: your points.
• 16:48
  Speaker 4: Oh yeah, I love it, So you do that question.
• 16:51
  Speaker 4: I absolutely love it.
• 16:52
  Speaker 8: I mean every day it's like, oh, these annex offers,
• 16:54
  Speaker 8: you know, what can I get here for this discount paper.
• 16:57
  Speaker 6: And redsheet tracking?
• 16:58
  Speaker 8: But I really should, honestly, I mean it's that good,
• 17:00
  Speaker 8: I think.
• 17:01
  Speaker 6: So Paul's like, I cannot get into this.
• 17:04
  Speaker 4: But the kids are.
• 17:05
  Speaker 2: Because I mean I've noticed it that they really are
• 17:08
  Speaker 2: good at gaming the system and to the point where,
• 17:11
  Speaker 2: you know, I'm going to Barcelona for the weekend on points,
• 17:13
  Speaker 2: you know, right exactly.
• 17:15
  Speaker 3: And these premium credit cards are almost like coupon books
• 17:18
  Speaker 3: in any ways, right because they offer you know, like
• 17:20
  Speaker 3: fifty dollars a quarter at well, actually it's seventy five
• 17:23
  Speaker 3: dollars a quarter at Lululemon for instance, right, the Camic's
• 17:26
  Speaker 3: Platinum card. And then people try to buy gift card
• 17:28
  Speaker 3: and stack them and use them like a year later.
• 17:31
  Speaker 4: Paul's laughing.
• 17:31
  Speaker 8: I mean that's true, and they carry those really high
• 17:33
  Speaker 8: annual fees. But I always think to myself, look how
• 17:36
  Speaker 8: much I'm getting back for this, and that ways the
• 17:38
  Speaker 8: fees sometimes at least in my mind.
• 17:40
  Speaker 7: So there you go.
• 17:41
  Speaker 6: What are what are Visa MasterCards saying about this?
• 17:44
  Speaker 8: So they are they signed onto this deal, they reach
• 17:47
  Speaker 8: this agreement. I think they're pretty happy with the terms
• 17:50
  Speaker 8: of it because you know, that kind of lets them
• 17:51
  Speaker 8: walk away. The issuing banks like JP Morgan, Bank of America,
• 17:54
  Speaker 8: all of them are also defendants. They get to walk
• 17:56
  Speaker 8: away from this litigation. The overhang would be removed, right,
• 17:59
  Speaker 8: So it's really the merchants. Are all of the merchants
• 18:02
  Speaker 8: going to sign on? And what are those objections look
• 18:04
  Speaker 8: like in the coming months to the court?
• 18:07
  Speaker 4: Stay with us. More from Bloomberg Intelligence coming up after this.
• 18:14
  Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
• 18:18
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• 18:22
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• 18:25
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• 18:29
  Speaker 2: I don't know, for a lot of us that have
• 18:30
  Speaker 2: been in this market for a long time, this is
• 18:31
  Speaker 2: kind of the end of an.
• 18:33
  Speaker 4: Ear, if you will, Warren Buffett.
• 18:35
  Speaker 2: Warren Buffett saying that he is going quiet and marking
• 18:39
  Speaker 2: the end of an ear for one of the business
• 18:40
  Speaker 2: world's most watched investing gurus. He will stop writing BERTRAI
• 18:44
  Speaker 2: Hathaway's annual letters and speaking at its meetings.
• 18:48
  Speaker 4: Let's bring in Matthew Palozoli. He's a senior analyst.
• 18:50
  Speaker 2: He covers Berkshire Hathaway and the property and casualty insurance business.
• 18:55
  Speaker 4: He joins us here in our Bloomberg Interactive Brooker Studio Boy.
• 18:58
  Speaker 2: Again, for most of in America, this is a big
• 19:02
  Speaker 2: piece of news that Warren Buffett is stepping back from
• 19:06
  Speaker 2: the day to day, which he's been doing over time.
• 19:07
  Speaker 9: I yes, so you know, kind of sad day said
• 19:10
  Speaker 9: for us Berkshire watchers. But we've known it. I mean this,
• 19:15
  Speaker 9: so we knew this letter was coming out. He does
• 19:17
  Speaker 9: this every year around Thanksgiving. We also knew he was
• 19:20
  Speaker 9: stepping down as CEO, so not huge surprise in this letter.
• 19:26
  Speaker 9: I think the going quiet thing was kind of to
• 19:29
  Speaker 9: everyone a little bit by surprise. I think maybe the
• 19:32
  Speaker 9: thought was, hey, he's he's gonna he's stepping back a CEO,
• 19:36
  Speaker 9: but maybe he'll kind of be out there in the
• 19:38
  Speaker 9: public and he's still chairman, so maybe we'd still hear
• 19:41
  Speaker 9: more from him. A little while ago he said he
• 19:43
  Speaker 9: wasn't going to speak at the meeting, and now he's
• 19:45
  Speaker 9: going to kind of focus on his philanthropic work. And
• 19:48
  Speaker 9: he's also a ninety five years old, he's maybe a
• 19:50
  Speaker 9: little tired.
• 19:50
  Speaker 4: Yeah, exactly.
• 19:52
  Speaker 2: And he's going to donate more than one point three
• 19:54
  Speaker 2: billion dollars to four family foundations and plans to quote
• 19:57
  Speaker 2: step up the pace of his childable giving to kids
• 20:00
  Speaker 2: foundations while he's still alive.
• 20:01
  Speaker 4: So that seems to be the point of life.
• 20:03
  Speaker 2: He is any reason to think that the business strategies,
• 20:06
  Speaker 2: the operations Hathaway may change now that he has kind
• 20:11
  Speaker 2: of stepped back on another step, I guess so.
• 20:13
  Speaker 10: I don't think so right away.
• 20:14
  Speaker 9: So he is always praising his successor Greg Abel, talking
• 20:19
  Speaker 9: about how he maintains the ethos of Berkshire, and they'll
• 20:21
  Speaker 9: be doing the same thing. I think Abel walks a
• 20:24
  Speaker 9: fine line now where I think over the next couple
• 20:27
  Speaker 9: of years he will want to put his own stamp
• 20:29
  Speaker 9: and make a name for himself, but also not stray
• 20:33
  Speaker 9: too far from what has led to this massive value
• 20:38
  Speaker 9: creation of Berkshire. So I don't think anything dramatic happens
• 20:41
  Speaker 9: in the near term.
• 20:43
  Speaker 10: You know, we talked about this.
• 20:44
  Speaker 9: I think in the past the amount of capital they're
• 20:47
  Speaker 9: sitting on and Able is a good capital allocator, at
• 20:50
  Speaker 9: least according to Buffett. Maybe something happens there special dividend
• 20:53
  Speaker 9: or something like that. You know, no guarantees on any
• 20:56
  Speaker 9: of that stuff, but I could see Able wanting to
• 20:58
  Speaker 9: put that kind of stamp on the company.
• 21:00
  Speaker 2: Because again what we learned I guess from the last
• 21:01
  Speaker 2: quarterly released was the cash is now three hundred and
• 21:04
  Speaker 2: eighty two billion dollars.
• 21:06
  Speaker 4: You know, it's a number that's you know, most portfolio
• 21:09
  Speaker 4: managers what have wouldn't know where to start.
• 21:11
  Speaker 10: Get boggles of mine.
• 21:12
  Speaker 9: I think even in the letter he had mentioned, uh,
• 21:15
  Speaker 9: there's just not a lot of things that moved the
• 21:16
  Speaker 9: needle for them. So they bought a twelve billion dollar
• 21:20
  Speaker 9: company in Alleghany a couple of years ago doesn't really
• 21:22
  Speaker 9: move the needle that much. Help the insurance businesses grow
• 21:25
  Speaker 9: a little bit, but overall for the company.
• 21:27
  Speaker 10: Not dramatic.
• 21:28
  Speaker 9: They bought this eleven billion dollar chemical business from Occidental.
• 21:32
  Speaker 9: You know these are these are ten and twelve billion
• 21:34
  Speaker 9: dollar deals, but they're just not moving the needle for
• 21:37
  Speaker 9: the company. So there's not not a ton they can
• 21:39
  Speaker 9: do too dramatically.
• 21:41
  Speaker 2: Historically, why is Warren and the company what's been their
• 21:45
  Speaker 2: thought about returning cash to shareholders?
• 21:47
  Speaker 9: The thought has been, we don't want to do that, right,
• 21:50
  Speaker 9: even said, you know, Berkshire shareholders have foregone dividends for
• 21:54
  Speaker 9: a reinvestment in America. I forgot the exact line, and
• 21:58
  Speaker 9: that was Buffets. He likes collecting dividends, he didn't like
• 22:01
  Speaker 9: paying them. I think he always thought we are the
• 22:04
  Speaker 9: best allocators of this. So if you're a owner of
• 22:08
  Speaker 9: Berkshire shares, would you rather have some money or would
• 22:10
  Speaker 9: you rather have warm Buffett invest that money for you?
• 22:13
  Speaker 10: I think over the past couple of years, again, they've
• 22:15
  Speaker 10: had so.
• 22:16
  Speaker 9: Much money that's been tough for them to invest it
• 22:18
  Speaker 9: in effective ways. But that's that's been the philosophy.
• 22:21
  Speaker 2: Yeah, because I mean it's I guess my response would be,
• 22:25
  Speaker 2: I can put it in cash too and get similar
• 22:27
  Speaker 2: rates of return to you. And I guess that when
• 22:32
  Speaker 2: it's ten twenty fifty one hundred million dollars line around,
• 22:34
  Speaker 2: not that big of account argument.
• 22:35
  Speaker 9: Now it's you know, it's significant, and it helped their
• 22:38
  Speaker 9: earnings over the past couple of years. Just getting four
• 22:41
  Speaker 9: percent on that was a dramatic tailwind to their earnings.
• 22:45
  Speaker 9: So you know, it didn't do much for the stock
• 22:49
  Speaker 9: after Buffett said he was leaving. That's been the thing
• 22:51
  Speaker 9: that's weighed on it more than anything else. But annual
• 22:55
  Speaker 9: see short term rates going down, so that tail wind diminishing.
• 22:59
  Speaker 10: I mean, I think the.
• 23:00
  Speaker 9: There is a school of thought that Berkshire, you know,
• 23:04
  Speaker 9: not the same without Buffett, but just maybe not as
• 23:07
  Speaker 9: good at almost all of their things.
• 23:10
  Speaker 10: That's one school of thought.
• 23:12
  Speaker 9: I could see other ones where you know, still able,
• 23:16
  Speaker 9: maybe takes a different direction. So that's another maybe catalyst
• 23:18
  Speaker 9: for the shares. But you know, it's it's a kind
• 23:21
  Speaker 9: of darker time for Burshure.
• 23:23
  Speaker 4: And what's Warren's ownership stake in the company.
• 23:27
  Speaker 10: So I don't know this of my head.
• 23:28
  Speaker 4: I don't controlling yeah, oh for sure.
• 23:31
  Speaker 2: And you're not going to have an activist investor come
• 23:33
  Speaker 2: in here and say this is just a poor allocation gun.
• 23:36
  Speaker 9: It would be impossible. He owns too much in the
• 23:39
  Speaker 9: The A shares I believe are ten thousand votes to
• 23:42
  Speaker 9: a B share, he owns most of them. He will
• 23:46
  Speaker 9: he's going to step up the amount he's giving away,
• 23:48
  Speaker 9: but he still owns.
• 23:49
  Speaker 10: Too much for anyone else to step in.
• 23:51
  Speaker 9: And should he should he die in his will, he would.
• 23:56
  Speaker 9: I think it's over ten years. His ownership goes to
• 23:59
  Speaker 9: these foundations run by his children, who I can't imagine.
• 24:03
  Speaker 9: Would you let them kind of immediately fall into the
• 24:07
  Speaker 9: hands of some sort of actives investor. I think he'd
• 24:09
  Speaker 9: set a timeframe of over ten years that he'd want.
• 24:12
  Speaker 10: That stuff divested. But he does want to divest it.
• 24:14
  Speaker 10: He doesn't want them to just hold on to it.
• 24:16
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• 24:24
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• 24:32
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• 24:35
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